Institutional Asset Manager 10.02.23

Crypto to be awarded cloak of decency

A particularly cold crypto winter has seen investor faith in digital assets plummet.
Research from Morning Consult finds net trust in cryptocurrency across 17 major markets declined over 2022 by a "whopping" 30 percentage points on average amid a series of high-profile bankruptcies and scandals.
In the year to December 2022, reported losses in all crypto scams rose 72 per cent to more than GBP329 million in the UK alone, according to ActionFraud.
But that has not seemed to dampen appetite and adoption of cryptocurrency remains relatively high.
In 18 of 42 countries covered by Morning Consult’s survey, at least one in five adults reported being crypto users in in the second half of last year.
It is no wonder then that this week’s newsletter includes a pledge from the UK government to "robustly regulate crypto asset activities", promising to bring "confidence and clarity to consumers and businesses alike".
A consultation issued by HM Treasury includes proposals for strengthening rules for crypto trading platforms and a ‘robust world-first regime for crypto lending’.
In an interview with managing editor Beverly Chandler, Matteo Dante Perruccio, president international of Wave Financial, IAM service provider winners, says regulation of crypto cannot come too soon.
Perruccio says it was only a matter of time before the crypto space saw a collapse on the scale of FTX.
"The industry grew way too fast in a short period of time," he says. "Whenever you see that you expect to see a Darwinian culling."
Perruccio is clear that regulation is the only sensible way forward noting that the technology giants including Facebook and Google "rarely do the right thing without being constrained by regulation – why would we expect an industry like crypto to do the right thing?".
He concludes: "I am surprised there aren’t more cases of significant abuse or fraud in this marketplace."
Elsewhere Colin Birchall, business development manager at Point Nine warns of the severe financial penalties imposed on firms unable to keep pace with the dual regulatory regimes that exist in a post-Brexit world.
Birchall points specifically to the EMIR refit which is due to be enforced on the 29th of April in the EU and on the 30th 0f September 2024 in the UK.
"We have seen lately huge fines going out to firms that simply have not had their eye on the ball. If businesses do not put in new processes to and adopt a new way of working then they will be left behind," Birchall warns.
Finally, Jason Yablon, head of US real estate, and Rich Hill, head of real estate strategy and research at Cohen & Steers, call on investors to take another look at REITs.
The beleaguered asset class has suffered notably last year with eye-watering losses of -27.9 per cent through September and -21 per cent during November according to the FTSE Nareit All Equity REITs Index.
Yet Yablon and Hill argue that this poor performance will not persist.
"We have advised investors to have strategic allocations to both private and listed real estate," they say. "While we think the market has priced in a worse recession than we expect, we believe the current downturn could present a similar arc to recessionary precedent – after which REITs performed remarkably well."
Gill Wadsworth, Editor

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